Passed by 51% of voters in 1988, Proposition 103 governs California’s insurance regulations. Now, critics are floating an idea to make changes to the law.
By Becca Habegger, ABC10
SACRAMENTO, Calif. — In the face of California’s home insurance crisis, a group of independent insurance agents and others in the industry are floating the idea of a ballot initiative.
They say voters could change a proposition that passed nearly 40 years ago and governs the state’s insurance marketplace.
Right now, homeowners and renters alike are feeling the effects of California’s insurance crisis. Policies are increasingly unavailable – and those that are, are increasingly unaffordable for many people.
Some in the insurance industry blame Proposition 103.
Passed by 51% of voters in 1988, Prop 103 set the framework for California’s insurance regulations, including requiring insurance companies to get permission from the elected state insurance commissioner before raising rates and allowing consumer groups to intervene in that process.
Critics gathered for a panel discussion Tuesday morning in Sacramento, calling Prop 103 outdated and blaming it for the current crisis. They said it has kept rates artificially low for decades, causing insurance companies to now pull back on the business they’re doing here.
“Proposition 103 should be reformed or repealed,” said Sam Sorich, vice president of legislative affairs with the Western Insurance Agents Association. “It doesn’t meet consumer needs. It has outlived its usefulness and has created a disastrous insurance market.”
He pointed to four particular provisions of Prop 103, which he said have wreaked the most havoc on the state’s insurance marketplace: the strict prior approval process for rate increases, making Insurance Commissioner an elected position, allowing consumer intervention in rate filings, and the mandated auto rating factors.
ABC10 spoke with the author of Prop 103, Harvey Rosenfield, who is also founder of consumer group Consumer Watchdog, which intervenes in the rate request process. Prop 103 allows intervenors to be reimbursed for substantial contributions to the rate filing process. The law stipulates that money comes from the insurer seeking the rate increase.
Rosenfield says Prop 103 has saved consumers billions of dollars in rate increases over the past nearly four decades and that Californians would be worse off without it.
“Proposition 103 has saved people $154 billion over the last years just on their auto insurance. It’s equal or bigger savings on homeowners insurance. It has protected people against price-gouging,” Rosenfield said. “It has empowered the public in a way that they were not empowered before in order to make sure that insurance companies behave themselves in this marketplace, which they don’t like to do.”
Currently, only voters can substantially change Prop 103, by way of another ballot initiative.
State lawmakers can change Prop 103 – but only with two-thirds of the vote and only if that change “furthers (the) purpose” of Prop 103. The California Supreme Court has previously ruled the “furthers its purpose” language means any change lawmakers enact must adhere to the intent of the proposition, thus upholding the will of the voters, who approved the law.
Critics on Tuesday suggested someone could submit a ballot initiative for the 2026 election that would simply strike those three words – “furthers its purpose” – from Prop 103, arguing such a change would then allow two-thirds of lawmakers to potentially overhaul the whole thing.
“It’s not a perfect solution. It would no doubt require an expensive campaign, and there’s no guarantee that there’s a willingness in the Legislature to positively change Proposition 103,” Sorich said. “But an initiative like this would offer the opportunity to break Proposition 103’s stranglehold on insurance reform. This type of initiative would at least create a legal environment where California’s elected representatives can work on solutions to the insurance issues that are plaguing their constituents.”
Rosenfield said he doubts such an effort would be successful.
“I see they’re thinking, ‘Oh, maybe if we could just strip away the protection of Prop 103 that the voters put in place, so the Legislature could repeal it.’ I could see how they would think that would be a really cool idea for the insurance industry. But here’s the thing: there’s a reason why Prop 103 passed in the first place– because people were sick and tired of the insurance industry ripping us off, discriminating against us, and the lawmakers in Sacramento refusing to do a thing to lift a finger against them. So we had to take matters into our own hands,” Rosenfield said. “Unlike the insurance industry, I think California voters are very savvy. They are not going to pass a one-line initiative which allows the Legislature to strip away the rest of the initiative, which is the reason why the insurance industry hasn’t tried that in the past. I mean, we have had two instances where insurance companies tried to repeal parts of Prop 103, and they were defeated by the voters. The reality is that the insurance industry is toxic.”
If such an initiative does land on the ballot, Rosenfield said, his group will fight it.
ABC10 has been following California’s insurance crisis for years now. See a SPECIAL REPORT or read THE ARTICLES now, to better understand how we got here and what solutions are being proposed.